Privatization technologies used in Russia need to be modernized, Russian Prime Minister Mikhail Fradkov said at the meeting. The government had to find the weak points of the privatization process and assess the reserves that could be used to boost the effectiveness of the privatization process in the country, the Prime Minister noted.

Mr. Fradkov stressed that the rate of privatization remained slow in Russia. He added that there were many inter-departmental disagreements over the issue, and the procedure itself had a “purely mechanical character”. In particular, he noted that property that was not privatized as planned was scheduled for privatization in the following year, and “privatization revenues did not fit into an annual cycle” as a result. According to the Prime Minister, large privatization deals of 2002 accounted for 70 percent of privatization revenues in 2003.

He stressed that federal property was “the most powerful resource” that the government had, and this resource should be used for the implementation of structural reforms and boosting economic growth.

For his part, Economy Minister German Gref proposed moving to two-year privatization plans. “This system could be built as soon as next year, so that the projected rate of privatization could be achieved by 2006,” he noted. In Mr. Gref’s opinion, this is the only way to enhance the quality of the privatization process.

He said about 10 percent of companies were “engaged in the hidden privatization process” in 2003. According to Mr. Gref, bankruptcy proceedings were initiated against such companies, and creditors were buying assets, bypassing the official privatization process.

As a result of audit inspections in 2003, the privatization process was stopped in 52 companies. According to the Economy Minister, 2,188 entities were privatized in 2003, out of the planned 3,926 (55.7 percent). Government-owned stakes in 630 companies were sold, out of the planned 1,965 (32 percent), and 574 state-owned companies were privatized out of the planned 970 (60 percent).